Weak government banks will become strong with this move of the government, common people will be able to get loans easily, know what is the preparation

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new Delhi. The government can invest a large amount to strengthen the weak public sector banks. Under this, weak state-run banks (PSBs) like Central Bank of India and Punjab and Sind Bank will get a major part of the proposed capital assistance from the government. With this step of the government, common people will be able to get loans easily.

The government has fixed a fund of Rs 15,000 crore for infusion of capital in PSBs in the current financial year i.e. 2021-22. This will help the public sector banks to meet regulatory requirements. Sources say that most of the capital assistance of Rs 15,000 crore will go to those state-owned banks, which got money through non-interest bearing bonds last year. The RBI had raised concerns over the proper valuation of these instruments.

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Punjab and Sind Bank had given approval to raise 4,600 crores

Sources quoted the central bank as saying that the net present value of investments made through zero coupon bonds last year is much lower than the face value as they were issued at a discount. These special securities are interest free with tenor of 10-15 years. Earlier this month, the board of Punjab and Sind Bank had approved raising equity capital of Rs 4,600 crore by issuing preference shares to the government.

Other banks will also decide on raising capital in March

Sources say that similarly other banks will decide on raising capital in March. The government has talked about an investment of Rs 15,000 crore in PSBs in the budget 2022-23. An investment of Rs 20,000 crore was approved in the budget for 2021-22. In March 2021, capital of Rs 14,500 crore was infused in four banks. Of these, Central Bank got the maximum amount of Rs 4,800 crore, UCO Bank Rs 2,600 crore, Bank of India Rs 3,000 crore and Indian Overseas Bank Rs 4,100 crore.

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All public sector banks made profits

To augment their resources, banks will be encouraged to raise funds from the market and sell their non-core assets, sources said. Indian Overseas Bank is also expected to get capital from the Finance Ministry. The additional capital is expected to improve their financial position and help the government get better valuations. All 12 public sector banks have made profits in the current financial year.

Tags: bank, RBI, Reserve Bank of India

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